Market For Distributed Farms That Grow Popular Fungi ‘Mushrooms’ In New York

In the Big Apple, where space is at a premium, it’s not easy to grow farm fresh produce. As a result, most produce that ends up on a diner’s plate there comes in refrigerated trucks from a farm far away.

It’s an ecological nightmare with all the energy needed to fuel the trucks — and the produce doesn’t always arrive in grocery stores or city restaurants all that fresh, after all.

But one startup hopes to change that paradigm by bringing a more compact concept of a farm into New York City. Smallhold provides a vertical farming system that allows produce to be grown in dining rooms, basements – or even in the grocery store.

“You can put [it] literally anywhere,” Smallhold’s Co-Founder and COO Adam DeMartino told PYMNTS in an interview. “When you make it super easy to farm something, it becomes a whole new business opportunity for a community. There’s a million things you can do with it.”

The Business Model

To expedite the growing process, Smallhold also works sort of like a nursery. The company grows the produce — mushrooms, at the moment — three-quarters of the way. Then it delivers the almost-grown produce to their customers, who finish growing the fungi in their vertical growing units.

And the customers also can have the help of the company in creating the right growing conditions. The units come with wifi and allow Smallhold to monitor and control them remotely. As a result, customers simply have to pick and serve the produce.

Smallhold’s farms also reduce the environmental impact of growing produce. Their farming units reportedly create 40 times the output per square foot than the traditional farm — and use 96 percent less water, according to the company.

One freight farm can grow approximately two acres worth of produce, according to the company, and that can be sold either direct to consumers (D2C) or through partnerships with local distributors, restaurants and grocery stores.

And talk about local. Food production hubs — like those used by Freight Farms or Smallhold — were designed for urban settings where it can be difficult to access truly fresh food.

No farm? No problem. DeMartino said Smallhold develops mushrooms that are already fully grown, too, to help introduce new customers to its growing system.

The Mushroom Market

Smallhold chose to grow mushrooms because of strong demand. “The market for mushrooms is just so strong, especially local mushrooms,” DeMartino said, adding that beautiful exotic fungi have good margins.

The company grow all sorts of mushrooms — about 10 different species. And the mushrooms grow well in their high-tech environment: One Smallhold customer, for example, was able to grow a mushroom that weighed in at two pounds.

And the mushrooms also appeal to consumers who might want an alternative to meat, especially if they want a vegan or vegetarian option.

“A lot of people are looking to other protein sources,” DeMartino said. “Mushrooms make an actually great main if you’re at a restaurant.”

Overall, consumers are demanding healthier food when they are dining out — and are looking for vegan and other health-conscious options. According to an NPD study, health and wellness-related activity is leading to healthier restaurants that Smallhold could serve.

“It’s hard to miss all the vegan eateries, gluten-free bakeries and juice shops popping up across the map these days, hoping to grab a piece of the health pie (or rather, gluten-free, vegan rhubarb pie),” according to the study.

The New Produce Section

In the future, DeMartino wants to change the way consumers buy their produce — especially in the grocery store.

“The idea is — over the course of the next coming to years — to replace the produce aisle,” DeMartino said.

And, of course, he wants to grow more items than just mushrooms. Other produce is on the Smallhold roadmap as well.

“There’s many, many different crops that we can grow on site,” DeMartino said.

But he isn’t quite ready to expand to residential customers yet. An individual or family is just not going to purchase the same quantities that a restaurant would, after all.

“Our goal isn’t to have a novelty item that you keep in your kitchen to grow produce,” DeMartino said. “The goal is to make something that’s a utility.”

While DeMartino might not be looking to place Smallhold farms in consumer kitchens quite yet, he is looking to change consumer shopping behavior. By introducing the farms in grocery stores, he hopes that he can change consumer buying habits — and encourage people to buy farm-fresh produce.

In all, he’s trying to make people closer to the food — harkening back to the days of backyard gardens.

“[Smallhold is] also going to reconnect people to how produce is grown,” DeMartino said. “We’re reconnecting people back to their food in a busy society.”